Photo credit: Reverend Andy
Surviving the recession is a challenge, financially as well as emotionally.
Your investments are losing value. Your job doesn’t feel so secure anymore. Watching the news every night is downright depressing. How do you deal with the recession? What should you do?
The best advice I – or anyone – can give you for surviving the recession:
Just like you, I check my financial statements these days and I don’t like what I see. It ain’t pretty. But I refuse to panic. I’m a long-term investor. The stock portion of my portfolio is spread over several mutual funds, a few ETFs and a few individual stocks. Each and every one of these holdings was carefully chosen, after thorough research. I believe in these stocks and funds. I consider them as my best bet in growing my money – LONG TERM.
But markets are volatile. Bear markets are part of the investing game. And even though they happen quite frequently, the good news is that LONG TERM, the stock market returns an average of 10% annually (that’s the S&P 500‘s historical average). And if you’re a long-term investor, and hold on to your assets for longer than a year, any tax you’ll eventually pay when selling these assets is long-term capital gain tax.
To me, the only way to calmly accept a bear market is to pretty much ignore my portfolio. In a bull market, I check my portfolio every day. It’s fun and thrilling. In a bear market, I check it once a week, if that. It’s kind of like checking your blog stats too often: not a good idea.
In other words, I agree with J.D. Roth, who says that it pays to ignore financial news, and adds “The daily fluctuations of the stock market are meaningless to me”. I also agree with Valerie Morrison, who said in her post Is Your Subscriber Count Showing?, “[it's] like my financial investments. I don’t want to see my portfolio every day.”
Just like Moolanomy, “I am holding steady and continuing to invest for the long-term. I can do this because I have the right asset allocation and investment mix for my investment time horizon and risk tolerance.” (Read more in his interesting post “Should I Get Out Of The Stock Market?“)
No doubt, the current economic meltdown is a major one. We still don’t know where it is going to lead us or how it will end. The comparisons to 1929 are scary.
Given the complexity and the magnitude of the current financial crisis, I do believe it’s important to make sure you have FDIC insurance for any funds that are not invested in the stock market. Any other type of insurance is useless right now. Another alternative is to buy treasuries. Of course, none of this will protect you if our financial system collapses or if uncontrollable inflation erupts, but assuming you’re not going to buy gold bullion and hide it under your mattress, this is probably the best you can do to protect your money right now.
Whether you’re invested in the stock market or not, a global recession – or depression – is going to affect you. I would love to hear your thoughts. How are you surviving the recession?
I am not a financial adviser. The information provided here on surviving the recession is general in nature. Prior to taking any action, please do your own research.